UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-23027
John Hancock Collateral Trust
(Exact name of registrant as specified in charter)
601 Congress Street, Boston, Massachusetts 02210
(Address of principal executive offices) (Zip code)
Salvatore Schiavone
Treasurer
601 Congress Street
Boston, Massachusetts 02210
(Name and address of agent for service)
Registrant's telephone number, including area code: | 617-663-4497 |
Date of fiscal year end: | December 31 |
Date of reporting period: | June 30, 2018 |
ITEM 1. REPORTS TO STOCKHOLDERS.
John Hancock
Collateral Trust
Semiannual report 6/30/18
John Hancock
Collateral Trust
INVESTMENT OBJECTIVE
The fund seeks current income, while maintaining adequate liquidity, safeguarding the return of principal and minimizing risk of default.
PORTFOLIO COMPOSITION AS OF 6/30/18 (%)
TOP 10 ISSUERS AS OF 6/30/18 (%)
JP Morgan Securities LLC, 1.887% to 2.568%, 7-9-18 to 2-15-19 | 5.3 |
MUFG Bank, Ltd., 1.968% to 2.039%, 7-2-18 to 7-11-18 | 5.1 |
Toyota Motor Corp., 2.233% to 2.554%, 7-16-18 to 1-17-19 | 5.0 |
Macquarie Bank, Ltd., 1.660% to 2.855%, 7-20-18 to 6-24-19 | 5.0 |
US Bank NA, 2.313% to 2.410%, 8-27-18 to 5-24-19 | 4.3 |
Wells Fargo Bank NA, 2.104% to 2.583%, 7-2-18 to 5-23-19 | 4.3 |
State Street Bank & Trust Company, 2.028%, 7-30-18 | 3.7 |
Swedbank AB, 1.876%, 7-2-18 | 3.7 |
Thunder Bay Funding LLC, 2.275% to 2.446%, 8-20-18 to 11-13-18 | 3.7 |
Federal Farm Credit Bank, 1.952% to 2.130%, 9-5-19 to 2-18-20 | 3.4 |
TOTAL | 43.5 |
As a percentage of total investments. |
A note about risks
Fixed-income investments are subject to interest-rate and credit risk; their value will normally decline as interest rates rise or if a creditor or grantor is unable or unwilling to make principal or interest payments. Investing in foreign securities may entail the risk of currency fluctuations or heightened economic and political instability. Events in the financial markets have resulted, and may continue to result, in an unusually high degree of volatility in the financial markets, both domestic and foreign. Market volatility can cause greater likelihood of margin calls associated with securities on loan, reducing fund liquidity and potentially causing a dilutive impact to the fund. In addition, reduced liquidity in credit and fixed-income markets may adversely affect issuers worldwide. Liquidity—the extent to which a security may be sold or a derivative position closed without negatively affecting its market value—may be impaired by reduced trading volume, heightened volatility, rising interest rates, and other market conditions. A fund that invests in particular sectors is particularly susceptible to the impact of market, economic, regulatory, and other factors affecting those sectors. Please see the fund's registration statement for additional risks.
Your expenses |
These examples are intended to help you understand your ongoing operating expenses of investing in the fund so you can compare these costs with the ongoing costs of investing in other mutual funds.
Understanding fund expenses
As a shareholder of the fund, you incur two types of costs:
● | Transaction costs, which include sales charges (loads) on purchases or redemptions (if applicable), minimum account fee charge, etc. |
● | Ongoing operating expenses, including management fees, distribution and service fees (if applicable), and other fund expenses. |
We are presenting only your ongoing operating expenses here.
Actual expenses/actual returns
The first line of the table on the following page is intended to provide information about the fund’s actual ongoing operating expenses, and is based on the fund’s actual return. It assumes an account value of $1,000.00 on January 1, 2018, with the same investment held until June 30, 2018.
Together with the value of your account, you may use this information to estimate the operating expenses that you paid over the period. Simply divide your account value at June 30, 2018, by $1,000.00, then multiply it by the “expenses paid” for your share class from the table. For example, for an account value of $8,600.00, the operating expenses should be calculated as follows:
Hypothetical example for comparison purposes
The second line of the table on the following page allows you to compare the fund’s ongoing operating expenses with those of any other fund. It provides an example of the fund’s hypothetical account values and hypothetical expenses based on the fund’s actual expense ratio and an assumed 5% annualized return before expenses (which is not the fund’s actual return). It assumes an account value of $1,000.00 on January 1, 2018, with the same investment held until June 30, 2018. Look in any other fund shareholder report to find its hypothetical example and you will be able to compare these expenses. Please remember that these hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period.
Remember, these examples do not include any transaction costs, therefore, these examples will not help you to determine the relative total costs of owning different funds. If transaction costs were included, your expenses would have been higher. See the registration statements for details regarding transaction costs.
SHAREHOLDER EXPENSE EXAMPLE CHART |
Account | Ending | Expenses | Annualized | ||||||
value on | value on | paid during | expense | ||||||
1-1-2018 | 6-30-2018 | 6-30-20181 | ratio | ||||||
Actual expenses/actual returns | $1,000.00 | $1,008.70 | $0.45 | 0.09 | % | ||||
Hypothetical example for comparison purposes | 1,000.00 | 1,024.80 | 0.45 | 0.09 | % |
1 | Expenses are equal to the annualized expense ratio, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
SEMIANNUAL REPORT | JOHN HANCOCK COLLATERAL TRUST 3 |
Fund’s investments |
AS OF 6-30-18 (unaudited) | ||||||||
Maturity date | Yield (%) | Par value^ | Value | |||||
Commercial paper 41.6% | $1,098,120,826 | |||||||
(Cost $1,098,224,904) | ||||||||
Apple, Inc. | 09-10-18 | 2.199 | 51,000,000 | 50,786,445 | ||||
Bank of New York Mellon Corp. | 07-16-18 | 2.273 | 15,000,000 | 14,986,131 | ||||
Barclays Bank PLC | 07-05-18 | 2.008 | 25,000,000 | 24,992,125 | ||||
BASF SE | 07-12-18 | 2.029 | 5,000,000 | 4,996,488 | ||||
BMW US Capital LLC | 07-02-18 to 07-12-18 | 1.825 to 1.968 | 60,000,000 | 59,976,628 | ||||
BNP Paribas SA | 07-02-18 | 1.825 | 47,000,000 | 47,000,000 | ||||
Cargill Global Funding PLC | 07-05-18 | 1.937 | 25,000,000 | 24,991,933 | ||||
Chariot Funding LLC | 07-02-18 | 2.028 | 1,000,000 | 999,837 | ||||
Colgate-Palmolive Company | 07-02-18 to 07-10-18 | 1.917 to 1.958 | 57,333,000 | 57,310,407 | ||||
Cummins, Inc. | 07-11-18 | 2.039 | 2,000,000 | 1,998,705 | ||||
Danske Corp. | 07-02-18 | 1.977 | 5,600,000 | 5,599,090 | ||||
Emerson Electric Company | 07-06-18 | 1.947 | 29,000,000 | 28,989,117 | ||||
Georgia Transmission Corp. | 07-02-18 | 1.947 | 1,500,000 | 1,499,763 | ||||
Gotham Funding Corp. | 07-06-18 to 09-06-18 | 1.937 to 2.311 | 27,310,000 | 27,204,321 | ||||
Henkel of America, Inc. | 07-02-18 to 07-23-18 | 1.927 to 2.122 | 14,750,000 | 14,741,699 | ||||
JP Morgan Securities LLC | 07-09-18 to 09-06-18 | 1.887 to 1.985 | 25,000,000 | 24,949,925 | ||||
Koch Resources LLC | 07-02-18 | 1.906 to 1.988 | 70,000,000 | 69,988,917 | ||||
L’Oreal USA, Inc. | 07-10-18 | 2.029 | 20,000,000 | 19,988,267 | ||||
Macquarie Bank, Ltd. | 07-20-18 to 09-12-18 | 1.660 to 2.081 | 20,363,000 | 20,286,086 | ||||
Manhattan Asset Funding | ||||||||
Company LLC | 07-02-18 to 07-09-18 | 2.008 to 2.080 | 32,350,000 | 32,342,856 | ||||
MUFG Bank, Ltd. | 07-02-18 to 07-11-18 | 1.968 to 2.039 | 138,000,000 | 137,943,859 | ||||
National Rural Utilities Cooperative | ||||||||
Finance Corp. | 07-02-18 | 2.028 | 5,000,000 | 4,999,200 | ||||
Nestle Finance International, Ltd. | 07-02-18 | 1.947 | 1,600,000 | 1,599,747 | ||||
Old Line Funding LLC | 08-15-18 | 2.288 | 30,000,000 | 29,916,692 | ||||
ONE Gas, Inc. | 07-02-18 to 07-12-18 | 1.977 to 2.009 | 63,176,000 | 63,150,767 | ||||
Province of Quebec | 07-06-18 | 1.876 | 1,804,000 | 1,803,277 | ||||
Sumitomo Mitsui Trust Bank, Ltd. | 08-15-18 | 2.186 | 405,000 | 403,907 | ||||
Swedbank AB | 07-02-18 | 1.876 | 100,000,000 | 99,984,083 | ||||
Thunder Bay Funding LLC | 09-20-18 | 2.446 | 25,000,000 | 24,870,947 | ||||
Total Capital SA | 07-02-18 | 1.927 | 50,000,000 | 49,991,979 | ||||
Toyota Motor Finance Netherlands BV | 07-16-18 | 2.233 | 38,000,000 | 37,965,260 | ||||
Unilever Capital Corp. | 07-02-18 | 1.886 | 73,000,000 | 72,988,594 | ||||
University of California | 08-02-18 to 08-06-18 | 2.093 to 2.113 | 38,950,000 | 38,873,774 | ||||
Corporate interest-bearing obligations 38.5% | $1,016,367,149 | |||||||
(Cost $1,016,795,210) | ||||||||
American Honda Finance Corp. (3 | ||||||||
month LIBOR + 0.460%) (A) | 07-13-18 | 2.059 | 1,645,000 | 1,645,329 | ||||
American Honda Finance Corp. (3 | ||||||||
month LIBOR + 0.150%) (A) | 01-22-19 | 2.361 | 33,956,000 | 33,964,451 | ||||
American Honda Finance Corp. | 07-13-18 to 10-10-18 | 2.042 to 2.262 | 23,062,000 | 23,045,867 | ||||
ANZ New Zealand International, Ltd. | ||||||||
(3 month LIBOR + 0.150%) (A)(B) | 07-03-18 | 1.945 | 30,000,000 | 30,001,740 |
SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK COLLATERAL TRUST 4 |
Maturity date | Yield (%) | Par value^ | Value | |||||
Apple, Inc. | 02-22-19 | 2.281 | 14,795,000 | $14,721,714 | ||||
Australia & New Zealand Banking | ||||||||
Group, Ltd. | 06-13-19 | 2.697 | 1,500,000 | 1,492,354 | ||||
Bank of New York Mellon Corp. | 08-01-18 to 05-15-19 | 2.338 to 2.501 | 31,142,000 | 31,170,876 | ||||
BMW US Capital LLC (B) | 04-11-19 | 2.560 | 9,790,000 | 9,713,973 | ||||
Chevron Corp. | 05-16-19 | 2.551 | 6,852,000 | 6,790,023 | ||||
Cisco Systems, Inc. (3 month LIBOR + | ||||||||
0.500%) (A) | 03-01-19 | 2.305 | 9,402,000 | 9,433,241 | ||||
Cisco Systems, Inc. | 03-01-19 | 2.367 | 16,567,000 | 16,525,527 | ||||
Credit Suisse AG | 05-28-19 | 2.674 | 17,671,000 | 17,586,069 | ||||
Emerson Electric Company | 10-15-18 | 2.352 | 500,000 | 503,675 | ||||
Exxon Mobil Corp. | 03-01-19 to 03-15-19 | 2.260 to 2.409 | 7,245,000 | 7,208,506 | ||||
Illinois Tool Works, Inc. | 03-01-19 | 2.501 | 500,000 | 497,629 | ||||
International Bank for Reconstruction | ||||||||
& Development | 03-15-19 | 2.309 | 11,114,000 | 11,076,646 | ||||
John Deere Capital Corp. (3 month | ||||||||
�� LIBOR + 0.270%) (A) | 10-15-18 | 2.392 | 16,000,000 | 16,012,689 | ||||
John Deere Capital Corp. | 07-13-18 to 03-04-19 | 1.929 to 2.508 | 25,377,000 | 25,302,066 | ||||
Johnson & Johnson | 03-01-19 | 2.318 | 2,500,000 | 2,476,525 | ||||
JP Morgan Securities LLC (1 month | ||||||||
LIBOR + 0.190%) (A)(B) | 08-02-18 | 2.221 | 14,000,000 | 14,002,968 | ||||
JP Morgan Securities LLC (1 month | ||||||||
LIBOR + 0.250%) (A) | 12-14-18 | 2.355 | 30,000,000 | 30,001,200 | ||||
JP Morgan Securities LLC (1 month | ||||||||
LIBOR + 0.300%) (A)(B) | 02-15-19 | 2.406 | 50,000,000 | 50,014,600 | ||||
JP Morgan Securities LLC (3 month | ||||||||
LIBOR + 0.200%) (A)(B) | 12-14-18 | 2.568 | 24,000,000 | 24,022,728 | ||||
Macquarie Bank, Ltd. (1 month LIBOR | ||||||||
+ 0.260%) (A)(B) | 10-30-18 | 2.386 | 50,000,000 | 50,013,400 | ||||
Macquarie Bank, Ltd. (3 month LIBOR | ||||||||
+ 0.350%) (A)(B) | 03-15-19 to 04-04-19 | 2.587 to 2.633 | 15,200,000 | 15,208,234 | ||||
Macquarie Bank, Ltd. (B) | 01-15-19 to 06-24-19 | 2.530 to 2.855 | 48,658,000 | 48,484,783 | ||||
National Rural Utilities Cooperative | ||||||||
Finance Corp. | 11-01-18 to 02-08-19 | 1.734 to 2.556 | 48,047,000 | 49,177,903 | ||||
Novartis Securities Investment, Ltd. | 02-10-19 | 2.432 | 10,538,000 | 10,687,755 | ||||
Old Line Funding LLC (1 month LIBOR | ||||||||
+ 0.200%) (A)(B) | 11-09-18 | 2.278 | 15,000,000 | 14,999,595 | ||||
Old Line Funding LLC (1 month LIBOR | ||||||||
+ 0.320%) (A)(B) | 09-17-18 | 2.438 | 35,000,000 | 35,000,000 | ||||
PepsiCo, Inc. (1 month LIBOR) (A) | 10-15-18 | 2.242 | 15,940,000 | 15,941,367 | ||||
PepsiCo, Inc. | 02-22-19 | 2.410 | 4,000,000 | 3,974,561 | ||||
Philip Morris International, Inc. | 01-15-19 | 2.441 | 39,520,000 | 39,343,358 | ||||
PNC Bank NA | 11-05-18 to 03-04-19 | 2.013 to 2.553 | 24,524,000 | 24,419,094 | ||||
Shell International Finance BV | 08-10-18 to 11-15-18 | 2.170 to 2.360 | 34,000,000 | 33,963,343 | ||||
Sumitomo Mitsui Trust Bank, Ltd. (B) | 09-14-18 | 2.451 | 2,300,000 | 2,301,964 | ||||
The Boeing Company | 03-15-19 | 2.699 | 1,000,000 | 1,022,610 | ||||
The Coca-Cola Company | 11-01-18 | 2.340 | 23,653,000 | 23,564,630 | ||||
The Home Depot, Inc. | 09-10-18 | 2.063 | 12,620,000 | 12,616,740 | ||||
The Toronto-Dominion Bank | 09-06-18 | 2.156 | 750,000 | 748,614 |
SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK COLLATERAL TRUST 5 |
Maturity date | Yield (%) | Par value^ | Value | |||||
The Toronto-Dominion Bank (3 month | ||||||||
LIBOR + 0.430%) (A) | 09-19-18 | 2.475 | 10,000,000 | $10,009,204 | ||||
The Walt Disney Company | 09-17-18 | 1.419 | 1,250,000 | 1,247,412 | ||||
Thunder Bay Funding LLC (1 month | ||||||||
LIBOR + 0.160%) (A)(B) | 08-20-18 | 2.275 | 50,000,000 | 49,999,350 | ||||
Thunder Bay Funding LLC (1 month | ||||||||
LIBOR + 0.250%) (A)(B) | 11-13-18 | 2.329 | 25,000,000 | 25,004,975 | ||||
Total Capital SA | 08-10-18 | 2.172 | 4,547,000 | 4,545,235 | ||||
Toyota Motor Credit Corp. (3 month | ||||||||
LIBOR + 0.150%) (A) | 12-24-18 | 2.328 | 10,000,000 | 10,007,356 | ||||
Toyota Motor Credit Corp. (3 month | ||||||||
LIBOR + 0.390%) (A) | 01-17-19 | 2.353 | 2,000,000 | 2,003,864 | ||||
Toyota Motor Finance Netherlands BV | ||||||||
(1 month LIBOR + 0.150%) (A) | 09-10-18 | 2.238 | 57,000,000 | 57,009,690 | ||||
Toyota Motor Finance Netherlands BV | ||||||||
(1 month LIBOR + 0.430%) (A) | 10-24-18 | 2.554 | 28,000,000 | 28,023,408 | ||||
Unilever Capital Corp. | 03-06-19 | 2.411 | 950,000 | 947,119 | ||||
US Bank NA (3 month LIBOR + | ||||||||
0.150%) (A) | 05-24-19 | 2.403 | 5,000,000 | 5,004,563 | ||||
US Bank NA (3 month LIBOR + | ||||||||
0.120%) (A) | 03-14-19 | 2.410 | 62,340,000 | 62,375,957 | ||||
Walmart, Inc. | 12-15-18 | 2.299 | 1,515,000 | 1,510,669 | ||||
Certificate of deposit 12.3% | $325,181,561 | |||||||
(Cost $325,091,297) | ||||||||
Canadian Imperial Bank of Commerce | ||||||||
(3 month LIBOR + 0.200%) (A) | 05-01-19 | 2.575 | 9,800,000 | 9,800,882 | ||||
State Street Bank & Trust Company | 07-30-18 | 2.028 | 100,000,000 | 100,000,316 | ||||
Sumitomo Mitsui Trust Bank, Ltd. | 07-06-18 | 1.967 | 50,000,000 | 50,000,000 | ||||
US Bank NA (1 month LIBOR + | ||||||||
0.180%) (A) | 08-27-18 | 2.313 | 50,000,000 | 50,013,350 | ||||
Wells Fargo Bank NA | 07-10-18 | 2.104 | 15,000,000 | 14,997,720 | ||||
Wells Fargo Bank NA (1 month LIBOR | ||||||||
+ 0.160%) (A) | 07-02-18 | 2.219 | 25,000,000 | 25,000,350 | ||||
Wells Fargo Bank NA (1 month LIBOR | ||||||||
+ 0.270%) (A) | 02-01-19 | 2.284 | 25,000,000 | 24,999,325 | ||||
Wells Fargo Bank NA (1 month LIBOR | ||||||||
+ 0.220%) (A) | 10-05-18 | 2.503 | 292,000 | 292,068 | ||||
Wells Fargo Bank NA (1 month LIBOR | ||||||||
+ 0.460%) (A) | 05-23-19 | 2.583 | 50,000,000 | 50,077,550 | ||||
U.S. Government Agency 3.4% | $91,193,059 | |||||||
(Cost $91,229,249) | ||||||||
Federal Farm Credit Bank (Prime rate | ||||||||
- 3.080%) (A) | 09-13-19 | 1.952 | 5,000,000 | 4,987,363 | ||||
Federal Farm Credit Bank (Prime rate | ||||||||
- 3.075%) (A) | 09-05-19 | 1.959 | 2,000,000 | 1,997,243 | ||||
Federal Farm Credit Bank (3 month | ||||||||
USBMMY + 0.040%) (A) | 02-12-20 | 1.979 | 17,310,000 | 17,301,651 | ||||
Federal Farm Credit Bank (1 month | ||||||||
LIBOR + 0.180%) (A) | 10-11-19 | 2.038 | 6,690,000 | 6,711,684 |
SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK COLLATERAL TRUST 6 |
Maturity date | Yield (%) | Par value^ | Value | ||||||
Federal Farm Credit Bank (U.S. Federal | |||||||||
Funds Effective Rate + 0.120%) | |||||||||
(A) | 02-18-20 | 2.075 | 19,800,000 | $19,788,694 | |||||
Federal Farm Credit Bank (Prime rate | |||||||||
- 2.930%) (A) | 10-29-19 | 2.099 | 15,000,000 | 14,997,025 | |||||
Federal Farm Credit Bank (Prime rate | |||||||||
- 2.910%) (A) | 12-11-19 | 2.130 | 25,000,000 | 24,989,185 | |||||
Federal Home Loan Bank (3 month | |||||||||
LIBOR - 0.120%) (A) | 10-05-18 | 2.130 | 420,000 | 420,214 | |||||
Time deposits 2.8% | $75,000,000 | ||||||||
(Cost $75,000,000) | |||||||||
Sumitomo Mitsui Banking Corp. | 07-24-18 to 08-17-18 | 2.281 to 2.352 | 75,000,000 | 75,000,000 | |||||
Par value^ | Value | ||||||||
Repurchase agreement 3.5% | $93,704,000 | ||||||||
(Cost $93,704,000) | |||||||||
Repurchase Agreement with State Street Corp. dated | |||||||||
6-29-18 at 0.900% to be repurchased at $93,711,028 | |||||||||
on 7-2-18, collateralized by $95,730,000 U.S. Treasury | |||||||||
Notes, 1.625% due 7-31-19 (valued at $95,582,384, | |||||||||
including interest) | 93,704,000 | 93,704,000 | |||||||
Total investments (Cost $2,700,044,660) 102.1% | $2,699,566,595 | ||||||||
Other assets and liabilities, net (2.1)% | (56,804,268 | ) | |||||||
Total net assets 100.0% | $2,642,762,327 |
The percentage shown for each investment category is the total value of the category as a percentage of the net assets of the fund. |
^All par values are denominated in U.S. dollars unless otherwise indicated. |
Security Abbreviations and Legend |
LIBOR | London Interbank Offered Rate |
USBMMY | U.S. Treasury Bill Money Market Yield |
(A) | Variable rate obligation. |
(B) | These securities are exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may be resold, normally to qualified institutional buyers, in transactions exempt from registration. Rule 144A securities amounted to $368,768,310 or 14.0% of the fund’s net assets as of 6-30-18. |
At 6-30-18, the aggregate cost of investments for federal income tax purposes was $2,700,044,660. Net unrealized depreciation aggregated to $478,065, of which $207,769 related to gross unrealized appreciation and $685,834 related to gross unrealized depreciation. |
SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK COLLATERAL TRUST 7 |
Financial statements |
STATEMENT OF ASSETS AND LIABILITIES 6-30-18 (unaudited) |
Assets | |||
Unaffiliated investments, at value (Cost $2,700,044,660) | $2,699,566,595 | ||
Cash | 49,992,737 | ||
Interest receivable | 5,473,592 | ||
Other assets | 54,675 | ||
Total assets | 2,755,087,599 | ||
Liabilities | |||
Distributions payable | 5,047,600 | ||
Payable for investments purchased | 106,801,792 | ||
Payable to affiliates | |||
Administrative services fees | 294,696 | ||
Transfer agent fees | 4,753 | ||
Trustees’ fees | 1,476 | ||
Other liabilities and accrued expenses | 174,955 | ||
Total liabilities | 112,325,272 | ||
Net assets | $2,642,762,327 | ||
Net assets consist of | |||
Paid-in capital | $2,643,284,342 | ||
Distributions in excess of net investment income | (36,363 | ) | |
Accumulated net realized gain (loss) on investments | (7,587 | ) | |
Net unrealized appreciation (depreciation) on investments | (478,065 | ) | |
Net assets | $2,642,762,327 | ||
Net asset value per share | |||
Based on 264,180,957 shares of beneficial interest outstanding - unlimited number of shares | |||
authorized with no par value | $10.00 |
SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK COLLATERAL TRUST 8 |
STATEMENT OF OPERATIONS For the six months ended 6-30-18 (unaudited) |
Investment income | |||
Interest | $23,333,598 | ||
Expenses | |||
Investment management fees | 6,183,099 | ||
Administrative services fees | 367,742 | ||
Transfer agent fees | 29,753 | ||
Trustees’ fees | 23,805 | ||
Custodian fees | 90,044 | ||
Printing and postage | 9,117 | ||
Professional fees | 44,118 | ||
Other | 14,846 | ||
Total expenses | 6,762,524 | ||
Less expense reductions | (5,657,212 | ) | |
Net expenses | 1,105,312 | ||
Net investment income | 22,228,286 | ||
Realized and unrealized gain (loss) | |||
Net realized gain (loss) on | |||
Unaffiliated investments | (146 | ) | |
(146 | ) | ||
Change in net unrealized appreciation (depreciation) of | |||
Unaffiliated investments | (86,825 | ) | |
(86,825 | ) | ||
Net realized and unrealized loss | (86,971 | ) | |
Increase in net assets from operations | $22,141,315 |
SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK COLLATERAL TRUST 9 |
STATEMENTS OF CHANGES IN NET ASSETS |
Six months ended 6-30-18 | ||||||
(unaudited) | Year ended 12-31-17 | |||||
Increase (decrease) in net assets | ||||||
From operations | ||||||
Net investment income | $22,228,286 | $23,031,544 | ||||
Net realized loss | (146 | ) | (7,441 | ) | ||
Change in net unrealized appreciation (depreciation) | (86,825 | ) | (641,446 | ) | ||
Increase in net assets resulting from operations | 22,141,315 | 22,382,657 | ||||
Distributions to shareholders | ||||||
From net investment income | (22,267,120 | ) | (23,031,544 | ) | ||
Fund share transactions | ||||||
Shares issued | 17,956,334,596 | 28,330,290,388 | ||||
Repurchased | (16,980,938,041 | ) | (28,103,619,844 | ) | ||
Total from fund share transactions | 975,396,555 | 226,670,544 | ||||
Total increase | 975,270,750 | 226,021,657 | ||||
Net assets | ||||||
Beginning of period | 1,667,491,577 | 1,441,469,920 | ||||
End of period | $2,642,762,327 | $1,667,491,577 | ||||
Undistributed (Distributions in excess of) net | ||||||
investment income | $(36,363 | ) | $2,471 | |||
Share activity | ||||||
Shares outstanding | ||||||
Beginning of period | 166,686,636 | 144,053,426 | ||||
Shares issued | 1,794,939,981 | 2,831,295,288 | ||||
Shares repurchased | (1,697,445,660 | ) | (2,808,662,078 | ) | ||
End of period | 264,180,957 | 166,686,636 |
SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK COLLATERAL TRUST 10 |
Financial highlights |
Period ended | 6-30-181 | 12-31-17 | 12-31-16 | 12-31-152 | ||||||||
Per share operating performance | ||||||||||||
Net asset value, beginning of period | $10.00 | $10.01 | $10.00 | $10.01 | ||||||||
Net investment income3 | 0.09 | 0.11 | 0.05 | 0.01 | ||||||||
Net realized and unrealized gain (loss) on investments | — | (0.01 | ) | 0.02 | (0.01) | |||||||
Total from investment operations | 0.09 | 0.10 | 0.07 | 0.00 | ||||||||
Less distributions | ||||||||||||
From net investment income | (0.09) | (0.11 | ) | (0.06 | ) | (0.01) | ||||||
Net asset value, end of period | $10.00 | $10.00 | $10.01 | $10.00 | ||||||||
Total return (%) | 0.874 | 1.00 | 0.66 | 0.034 | ||||||||
Ratios and supplemental data | ||||||||||||
Net assets, end of period (in millions) | $2,643 | $1,667 | $1,441 | $1,608 | ||||||||
Ratios (as a percentage of average net assets): | ||||||||||||
Expenses before reductions | 0.545 | 0.54 | 0.54 | 0.545 | ||||||||
Expenses including reductions | 0.095 | 0.09 | 0.09 | 0.095 | ||||||||
Net investment income | 1.775 | 1.07 | 0.55 | 0.145 | ||||||||
Portfolio turnover (%)6 | 10 | 44 | 97 | 07 |
1 | Six months ended 6-30-18. Unaudited. |
2 | Period from 2-1-15 (commencement of operations) to 12-31-15. |
3 | Based on average daily shares outstanding. |
4 | Not annualized. |
5 | Annualized. |
6 | The calculation of portfolio turnover excludes amounts from all securities whose maturities or expiration dates at the time of acquisition were one year or less, which represents a significant amount of the investments held by the fund. |
7 | During the period ended December 31, 2015, securities purchased and/or sold by the fund utilized in the calculation of the portfolio turnover were acquired with less than one year until maturity. As a result, the portfolio turnover is 0%. |
SEE NOTES TO FINANCIAL STATEMENTS | SEMIANNUAL REPORT | JOHN HANCOCK COLLATERAL TRUST 11 |
Note 1 — Organization
John Hancock Collateral Trust (the fund) is the sole series of John Hancock Collateral Trust (the Trust), a Massachusetts business trust. The fund is an open-end management investment company organized under the Investment Company Act of 1940, as amended (the 1940 Act). However, beneficial interests of the fund are not being registered under the Securities Act of 1933, as amended. The current investors in the fund are investment companies advised by John Hancock Advisers, LLC, the fund's investment advisor (the Advisor), or its affiliates. The fund serves primarily as investment vehicle for cash received as collateral by such affiliated funds for participation in securities lending.
The investment objective of the fund is to seek current income, while maintaining adequate liquidity, safeguarding the return of principal and minimizing risk of default. The fund invests only in U.S. dollar-denominated securities rated, at the time of investment, within the highest short-term credit categories and their unrated equivalents. The fund's net asset value (NAV) varies daily.
Note 2 — Significant accounting policies
The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP), which require management to make certain estimates and assumptions as of the date of the financial statements. Actual results could differ from those estimates and those differences could be significant. The fund qualifies as an investment company under Topic 946 of Accounting Standards Codification of US GAAP.
Events or transactions occurring after the end of the fiscal period through the date that the financial statements were issued have been evaluated in the preparation of the financial statements. The following summarizes the significant accounting policies of the fund:
Security valuation. Investments are stated at value as of the scheduled close of regular trading on the New York Stock Exchange (NYSE), normally at 4:00 p.m., Eastern Time. In case of emergency or other disruption resulting in the NYSE not opening for trading or the NYSE closing at a time other than the regularly scheduled close, the net asset value (NAV) may be determined as of the regularly scheduled close of the NYSE pursuant to the fund's Valuation Policies and Procedures.
In order to value the securities, the fund uses the following valuation techniques: Debt obligations are valued based on the evaluated prices provided by an independent pricing vendor or from broker-dealers. Independent pricing vendors utilize matrix pricing which takes into account factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data, as well as broker supplied prices.
Other portfolio securities and assets, for which reliable market quotations are not readily available, are valued at fair value as determined in good faith by the fund's Pricing Committee following procedures established by the Board of Trustees. The frequency with which these fair valuation procedures are used cannot be predicted and fair value of securities may differ significantly from the value that would have been used had a ready market for such securities existed.
The fund uses a three-tier hierarchy to prioritize the pricing assumptions, referred to as inputs, used in valuation techniques to measure fair value. Level 1 includes securities valued using quoted prices in active markets for identical securities. Level 2 includes securities valued using other significant observable inputs. Observable inputs may include quoted prices for similar securities, interest rates, prepayment speeds and credit risk. Prices for securities valued using these inputs are received from independent pricing vendors and brokers and are based on an evaluation of the inputs described. Level 3 includes securities valued using significant unobservable inputs when market prices are not readily available or reliable, including the fund's own assumptions in determining the fair value of investments. Factors used in determining value may include market or issuer specific events or trends, changes in interest rates and credit quality. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. Changes in valuation techniques and related inputs may result in transfers into or out of an assigned level within the disclosure hierarchy.
As of June 30, 2018, all investments are categorized as Level 2 under the hierarchy described above.
Repurchase agreements. The fund may enter into repurchase agreements. When the fund enters into a repurchase agreement, it receives collateral that is held in a segregated account by the fund's custodian. The collateral amount is
marked-to-market and monitored on a daily basis to ensure that the collateral held is in an amount not less than the principal amount of the repurchase agreement plus any accrued interest. Collateral received by the fund for repurchase agreements is disclosed in the Fund's investments as part of the caption related to the repurchase agreement.
Repurchase agreements are typically governed by the terms and conditions of the Master Repurchase Agreement and/or Global Master Repurchase Agreement (collectively, MRA). Upon an event of default, the non-defaulting party may close out all transactions traded under the MRA and net amounts owed. Absent an event of default, assets and liabilities resulting from repurchase agreements are not offset in the Statement of assets and liabilities. In the event of a default by the counterparty, realization of the collateral proceeds could be delayed, during which time the collateral value may decline or the counterparty may have insufficient assets to pay back claims resulting from close-out of the transactions.
Security transactions and related investment income. Investment security transactions are accounted for on a trade date plus one basis for daily NAV calculations. However, for financial reporting purposes, investment transactions are reported on trade date. Interest income is accrued as earned. Interest income includes coupon interest and amortization/accretion of premiums/discounts on debt securities. Debt obligations may be placed in a non-accrual status and related interest income may be reduced by stopping current accruals and writing off interest receivable when the collection of all or a portion of interest has become doubtful. Gains and losses on securities sold are determined on the basis of identified cost and may include proceeds from litigation.
Line of credit. The fund may have the ability to borrow from banks for temporary or emergency purposes, including meeting redemption requests that otherwise might require the untimely sale of securities. Pursuant to the fund's custodian agreement, the custodian may loan money to the fund to make properly authorized payments. The fund is obligated to repay the custodian for any overdraft, including any related costs or expenses. The custodian may have a lien, security interest or security entitlement in any fund property that is not otherwise segregated or pledged, to the extent of any overdraft, and to the maximum extent permitted by law. Overdrafts at period end are presented under the caption Due to custodian in the Statement of assets and liabilities.
The fund and other affiliated funds have entered into a syndicated line of credit agreement with Citibank, N.A. as the administrative agent that enables them to participate in a $750 million unsecured committed line of credit. Excluding commitments designated for a certain fund and subject to the needs of all other affiliated funds, the fund can borrow up to an aggregate commitment amount of $500 million, subject to asset coverage and other limitations as specified in the agreement. A commitment fee payable at the end of each calendar quarter, based on the average daily unused portion of the line of credit, is charged to each participating fund based on a combination of fixed and asset based allocations and is reflected in Other expenses on the Statement of operations. For the six months ended June 30, 2018, the fund had no borrowings under the line of credit. Commitment fees for the six months ended June 30, 2018 were $2,336.
Expenses. Within the John Hancock group of funds complex, expenses that are directly attributable to an individual fund are allocated to such fund. Expenses that are not readily attributable to a specific fund are allocated among all funds in an equitable manner, taking into consideration, among other things, the nature and type of expense and the fund's relative net assets. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
Federal income taxes. The fund intends to continue to qualify as a regulated investment company by complying with the applicable provisions of the Internal Revenue Code and will not be subject to federal income tax on taxable income that is distributed to shareholders. Therefore, no federal income tax provision is required.
For federal income tax purposes, as of December 31, 2017, the fund has a short-term capital loss carryforward of $7,441 available to offset future net realized capital gains. This carryforward does not expire.
As of December 31, 2017, the fund had no uncertain tax positions that would require financial statement recognition, derecognition or disclosure. The fund's federal tax returns are subject to examination by the Internal Revenue Service for a period of three years.
Distribution of income and gains. Distributions to shareholders from net investment income and net realized gains, if any, are recorded on the ex-date. The fund typically declares dividends daily and pays them monthly. Capital gain distributions, if any, are typically distributed annually.
Such distributions, on a tax basis, are determined in conformity with income tax regulations, which may differ from US GAAP. Distributions in excess of tax basis earnings and profits, if any, are reported in the fund's financial statements as a return of capital. The final determination of tax characteristics of the fund's distribution will occur at the end of the year and will subsequently be reported to shareholders.
Capital accounts within the financial statements are adjusted for permanent book-tax differences. These adjustments have no impact on net assets or the results of operations. Temporary book-tax differences, if any, will reverse in a subsequent period. The fund had no material book-tax differences at December 31, 2017.
Note 3 — Guarantees and indemnifications
Under the Trust's organizational documents, its Officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Trust, including the fund. Additionally, in the normal course of business, the fund enters into contracts with service providers that contain general indemnification clauses. The fund's maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the fund that have not yet occurred. The risk of material loss from such claims is considered remote.
Note 4 — Fees and transactions with affiliates
John Hancock Advisers, LLC (the Advisor) serves as investment advisor for the fund. John Hancock Funds, LLC (the Distributor), an affiliate of the Advisor, serves as principal underwriter of the fund. The Advisor and the Distributor are indirect, wholly owned subsidiaries of Manulife Financial Corporation (MFC).
Management fee. The fund has an investment management agreement with the Advisor under which the fund pays a daily management fee to the Advisor equivalent on an annual basis to the sum of: (a) 0.500% of the first $1.5 billion of the fund's average net assets and (b) 0.480% of the fund's average net assets in excess of $1.5 billion. The Advisor has a subadvisory agreement with John Hancock Asset Management a division of Manulife Asset Management (US) LLC, an indirectly owned subsidiary of MFC and an affiliate of the Advisor. The fund is not responsible for payment of the subadvisory fees.
The Advisor has contractually agreed to waive its advisory fee by 0.45% of the fund's average net assets. The expense waiver will remain in effect until April 30, 2019, unless renewed by mutual agreement of the fund and the Advisor based upon a determination that this is appropriate under the circumstances at the time and may be terminated at any time thereafter.
The expense reductions described above amounted to $5,657,212 for the six months ended June 30, 2018.
The investment management fees, including the impact of the waivers and reimbursements as described above, incurred for the six months ended June 30, 2018 were equivalent to a net annual effective rate of 0.01% of the fund's average daily net assets.
Administrative services fees. Pursuant to a service agreement, the fund reimburses the Advisor for all expenses associated with providing the administrative, financial, legal, compliance, accounting and recordkeeping services to the fund, including the preparation of all tax returns, periodic reports to shareholders and regulatory reports, among other services. These expenses are allocated to each share class based on its relative net assets at the time the expense was incurred. These accounting and legal services fees incurred for the six months ended June 30, 2018 amounted to an annual rate of 0.02% of the fund's average daily net assets.
Transfer agent fees. The fund has a transfer agent agreement with John Hancock Signature Services, Inc. (the Transfer Agent), an affiliate of the Advisor. Monthly, the fund pays the Transfer Agent a fee which is based on an annual rate of $60,000. The fund also pays certain out-of-pocket expenses to the Transfer Agent.
Trustee expenses. The fund compensates each Trustee who is not an employee of the Advisor or its affiliates. The costs of paying Trustee compensation and expenses are allocated to the fund based on its net assets relative to other funds within the John Hancock group of funds complex.
Note 5 — Purchase and sale of securities
Purchases and sales of securities, other than short-term investments, amounted to $119,974,432 and $80,492,780, respectively, for the six months ended June 30, 2018.
CONTINUATION OF INVESTMENT ADVISORY AND SUBADVISORY AGREEMENTS
Evaluation of Advisory and Subadvisory Agreements by the Board of Trustees
This section describes the evaluation by the Board of Trustees (the Board) of John Hancock Collateral Trust (the fund) of the Advisory Agreement (the Advisory Agreement) with John Hancock Advisers, LLC (the Advisor) and the Subadvisory Agreement (the Subadvisory Agreement) with John Hancock Asset Management a division of Manulife Asset Management (US) LLC (the Subadvisor) for the fund. The Advisory Agreement and Subadvisory Agreement are collectively referred to as the Agreements. Prior to the June 19-21, 2018 in-person meeting, at which the Agreements were approved, the Board also discussed and considered information regarding the proposed continuation of the Agreements at an in-person meeting held on May 30-31, 2018.
Approval of Advisory and Subadvisory Agreements
At in-person meetings held on June 19-21, 2018, the Board, including the Trustees who are not parties to any Agreement or considered to be interested persons of the fund under the Investment Company Act of 1940, as amended (the 1940 Act) (the Independent Trustees), reapproved for an annual period the continuation of the Advisory Agreement between the fund and the Advisor and the Subadvisory Agreement between the Advisor and the Subadvisor with respect to the fund.
In considering the Advisory Agreement and the Subadvisory Agreement, the Board received in advance of the meetings a variety of materials relating to the fund, the Advisor and the Subadvisor, including comparative performance, fee and expense information for a peer group of similar funds prepared by an independent third-party provider of fund data, performance information for an applicable benchmark index; and other information provided by the Advisor and the Subadvisor regarding the nature, extent and quality of services provided by the Advisor and the Subadvisor under their respective Agreements, as well as information regarding the Advisor's revenues and costs of providing services to the fund and any compensation paid to affiliates of the Advisor. At the meetings at which the renewal of the Advisory Agreement and Subadvisory Agreement are considered, particular focus is given to information concerning fund performance, comparability of fees and total expenses, and profitability. However, the Board notes that the evaluation process with respect to the Advisor and the Subadvisor is an ongoing one. In this regard, the Board also took into account discussions with management and information provided to the Board (including its various committees) at prior meetings with respect to the services provided by the Advisor and the Subadvisor to the fund. The information received and considered by the Board in connection with the May and June meetings and throughout the year was both written and oral. The Board noted the affiliation of the Subadvisor with the Advisor, noting any potential conflicts of interest. The Board also considered the nature, quality, and extent of non-advisory services, if any, to be provided to the fund by the Advisor's affiliates. The Board considered the Advisory Agreement and the Subadvisory Agreement separately in the course of its review. In doing so, the Board noted the respective roles of the Advisor and Subadvisor in providing services to the fund.
Throughout the process, the Board asked questions of and requested additional information from management. The Board is assisted by counsel for the fund and the Independent Trustees are also separately assisted by independent legal counsel throughout the process. The Independent Trustees also received a memorandum from their independent legal counsel discussing the legal standards for their consideration of the proposed continuation of the Agreements and discussed the proposed continuation of the Agreements in private sessions with their independent legal counsel at which no representatives of management were present.
Approval of Advisory Agreement
In approving the Advisory Agreement with respect to the fund, the Board, including the Independent Trustees, considered a variety of factors, including those discussed below. The Board also considered other factors (including conditions and trends prevailing generally in the economy, the securities markets, and the industry) and did not treat any single factor as determinative, and each Trustee may have attributed different weights to different factors. The Board's conclusions may be based in part on its consideration of the advisory and subadvisory arrangements in prior years and on the Board's ongoing regular review of fund performance and operations throughout the year.
Nature, extent, and quality of services. Among the information received by the Board from the Advisor relating to the nature, extent, and quality of services provided to the fund, the Board reviewed information provided by the Advisor relating to its operations and
personnel, descriptions of its organizational and management structure, and information regarding the Advisor's compliance and regulatory history, including its Form ADV. The Board also noted that on a regular basis it receives and reviews information from the fund's Chief Compliance Officer (CCO) regarding the fund's compliance policies and procedures established pursuant to Rule 38a-1 under the 1940 Act. The Board observed that the scope of services provided by the Advisor, and of the undertakings required of the Advisor in connection with those services, including maintaining and monitoring its own and the fund's compliance programs, risk management programs, liquidity management programs and cybersecurity programs, had expanded over time as a result of regulatory, market and other developments. The Board considered that the Advisor is responsible for the management of the day-to-day operations of the fund, including, but not limited to, general supervision of and coordination of the services provided by the Subadvisor, and is also responsible for monitoring and reviewing the activities of the Subadvisor and third-party service providers. The Board also considered the significant risks assumed by the Advisor in connection with the services provided to the fund including entrepreneurial risk in sponsoring new funds and ongoing risks including investment, operational, enterprise, litigation, regulatory and compliance risks with respect to all funds.
In considering the nature, extent, and quality of the services provided by the Advisor, the Trustees also took into account their knowledge of the Advisor's management and the quality of the performance of the Advisor's duties, through Board meetings, discussions and reports during the preceding year and through each Trustee's experience as a Trustee of the fund and of the other funds in the John Hancock group of funds complex (the John Hancock Fund Complex).
In the course of their deliberations regarding the Advisory Agreement, the Board considered, among other things:
(a) | the skills and competency with which the Advisor has in the past managed the fund's affairs and its subadvisory relationship, the Advisor's oversight and monitoring of the Subadvisor's investment performance and compliance programs, such as the Subadvisor's compliance with fund policies and objectives, review of brokerage matters, including with respect to trade allocation and best execution and the Advisor's timeliness in responding to performance issues; | |
(b) | the background, qualifications and skills of the Advisor's personnel; | |
(c) | the Advisor's compliance policies and procedures and its responsiveness to regulatory changes and fund industry developments; | |
(d) | the Advisor's administrative capabilities, including its ability to supervise the other service providers for the fund, as well as the Advisor's oversight of the Fund's securities lending activity, its monitoring of class action litigation and collection of class action settlements on behalf of the Fund, and bringing loss recovery actions on behalf of the Fund; | |
(e) | the financial condition of the Advisor and whether it has the financial wherewithal to provide a high level and quality of services to the fund; and | |
(f) | the Advisor's reputation and experience in serving as an investment advisor to the fund and the benefit to shareholders of investing in funds that are part of a family of funds offering a variety of investments. |
The Board concluded that the Advisor may reasonably be expected to continue to provide a high quality of services under the Advisory Agreement with respect to the fund.
Investment performance. In connection with the consideration of the Advisory Agreement, the Board:
(a) | reviewed information prepared by management regarding the fund's performance; | |
(b) | considered the comparative performance of an applicable benchmark index; | |
(c) | considered the performance of comparable funds, if any, as included in the report prepared by an independent third-party provider of fund data; and | |
(d) | took into account the Advisor's analysis of the fund's performance and its plans and recommendations regarding the fund's subadvisory arrangement generally. |
The Board noted that while it found the data provided by the independent third-party generally useful it recognized its limitations, including in particular that the data may vary depending on the end date selected and the results of the performance comparisons may vary depending on the selection of the peer group. The Board noted that the fund outperformed its benchmark index and its peer group average for the one-year period ended December 31, 2017 and for the period from the fund's inception on February 28, 2015 to December 31, 2017. The Board took into account management's discussion of the fund's performance, including the favorable performance relative to the peer group and benchmark for the one-year and since-inception periods. The Board concluded that the fund's performance has generally outperformed the historical performance of comparable funds and the fund's benchmark index.
Fees and expenses. The Board reviewed comparative information prepared by an independent third-party provider of fund data, including, among other data, the fund's contractual and net management fees (and subadvisory fees, to the extent available) and total expenses as compared to similarly situated investment companies deemed to be comparable to the fund in light of the nature, extent and quality of the management and advisory and subadvisory services provided by the Advisor and the Subadvisor. In comparing the fund's contractual and net management fees to those of comparable funds, the Board noted that such fees include both advisory and administrative costs. The Board noted the fund's net management fees and net total expenses are lower than the peer group median.
The Board took into account management's discussion of the fund's expenses. The Board also took into account management's discussion with respect to the overall management fee, the fees of the Subadvisor, including the amount of the advisory fee retained by the Advisor after payment of the subadvisory fee, in each case in light of the services rendered for those amounts and the risks undertaken by the Advisor. The Board also noted that the Advisor pays the subadvisory fee. The Board also noted that, in addition, the Advisor is currently waiving fees and/or reimbursing expenses with respect to the fund and that the fund has breakpoints in its contractual management fee schedule that reduces management fees as assets increase. The Board reviewed information provided by the Advisor concerning the investment advisory fee charged by the Advisor or one of its advisory affiliates to other clients (including other funds in the John Hancock Fund Complex) having similar investment mandates, if any. The Board considered any differences between the Advisor's and Subadvisor's services to the fund and the services they provide to other comparable clients or funds. The Board concluded that the advisory fee paid with respect to the fund is reasonable in light of the nature, extent and quality of the services provided to the fund under the Advisory Agreement.
Profitability/Fall Out benefits. In considering the costs of the services to be provided and the profits to be realized by the Advisor and its affiliates (including the Subadvisor) from the Advisor's relationship with the fund, the Board:
(a) | reviewed financial information of the Advisor; | |||||||
(b) | reviewed and considered information presented by the Advisor regarding the net profitability to the Advisor and its affiliates with respect to the fund; | |||||||
(c) | received and reviewed profitability information with respect to the John Hancock Fund Complex as a whole; | |||||||
(d) | received information with respect to the Advisor's allocation methodologies used in preparing the profitability data and considered that the Advisor hired an independent third-party consultant to provide an analysis of the Advisor's allocation methodologies; | |||||||
(e) | considered that the Advisor also provides administrative services to the fund pursuant to an administrative services agreement; | |||||||
(f) | noted that the fund's Subadvisor is an affiliate of the Advisor; (g) noted that affiliates of the Advisor provide transfer agency services and placement services to the fund; | |||||||
(h) | noted that the Advisor also derives reputational and other indirect benefits from providing advisory services to the fund; |
(i) | noted that the subadvisory fees for the fund are paid by the Advisor; (j) considered the Advisor's ongoing costs and expenditures necessary to improve services, meet new regulatory and compliance requirements, and adapt to other challenges impacting the mutual fund industry; and | |||||||
(k) | considered that the Advisor should be entitled to earn a reasonable level of profits in exchange for the level of services it provides to the fund and the risks that it assumes as Advisor, including entrepreneurial, operational, reputational, litigation and regulatory risk. |
Based upon its review, the Board concluded that the level of profitability, if any, of the Advisor and its affiliates (including the Subadvisor) from their relationship with the fund was reasonable and not excessive.
Economies of scale. In considering the extent to which the fund may realize any economies of scale and whether fee levels reflect these economies of scale for the benefit of the fund shareholders, the Board:
1 | considered that the Advisor has agreed to waive a portion of its management fee and/or reimburse or pay operating expenses of the fund to reduce operating expenses; |
2 | reviewed the fund's advisory fee structure and concluded that (i) the fund's fee structure contains breakpoints at the subadvisory fee level and that such breakpoints are reflected as breakpoints in the advisory fees for the fund; and (ii) although economies of scale cannot be measured with precision, these arrangements permit shareholders of the fund to benefit from economies of scale if the fund grows. The Board also took into account management's discussion of the fund's advisory fee structure; and |
3 | the Board also considered the potential effect of the fund's future growth in size on its performance and fees. The Board noted that if the fund's assets increase over time, the fund may realize other economies of scale. |
Approval of Subadvisory Agreement
In making its determination with respect to approval of the Subadvisory Agreement, the Board reviewed:
(1) | information relating to the Subadvisor's business, including current subadvisory services to the fund (and other funds in the John Hancock Fund Complex); | |
(2) | the historical and current performance of the fund and comparative performance information relating to an applicable benchmark index and comparable funds; and | |
(3) | the subadvisory fee for the fund, including any breakpoints, and to the extent available, comparable fee information prepared by an independent third party provider of fund data. |
Nature, extent, and quality of services. With respect to the services provided by the Subadvisor, the Board received information provided to the Board by the Subadvisor, including the Subadvisor's Form ADV, as well as took into account information presented throughout the past year. The Board considered the Subadvisor's current level of staffing and its overall resources, as well as received information relating to the Subadvisor's compensation program. The Board reviewed the Subadvisor's history and investment experience, as well as information regarding the qualifications, background, and responsibilities of the Subadvisor's investment and compliance personnel who provide services to the fund. The Board also considered, among other things, the Subadvisor's compliance program and any disciplinary history. The Board also considered the Subadvisor's risk assessment and monitoring process. The Board reviewed the Subadvisor's regulatory history, including whether it was involved in any regulatory actions or investigations as well as material litigation, and any settlements and amelioratory actions undertaken, as appropriate. The Board noted that the Advisor conducts regular, periodic reviews of the Subadvisor and its operations, including regarding investment processes and organizational and staffing matters. The Board also noted that the fund's CCO and his staff conduct regular, periodic compliance reviews with the Subadvisor and present reports to the Independent Trustees regarding the same, which includes evaluating the regulatory compliance systems of the Subadvisor and procedures reasonably designed to assure compliance with the federal securities laws. The Board also took into account the financial condition of the Subadvisor.
The Board considered the Subadvisor's investment process and philosophy. The Board took into account that the Subadvisor's responsibilities include the development and maintenance of an investment program for the fund that is consistent with the fund's investment objective, the selection of investment securities and the placement of orders for the purchase and sale of such securities, as well as the implementation of compliance controls related to performance of these services. The Board also received information with respect to the Subadvisor's brokerage policies and practices, including with respect to best execution and soft dollars.
Subadvisor compensation. In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the fund, the Board noted that the fees under the Subadvisory Agreement are paid by the Advisor and not the fund. The Board also considered any potential conflicts of interest the Advisor might have in connection with the Subadvisory Agreement.
In addition, the Board considered other potential indirect benefits that the Subadvisor and its affiliates may receive from the Subadvisor's relationship with the fund, such as the opportunity to provide advisory services to additional funds in the John Hancock Fund Complex and reputational benefits.
Subadvisory fees. The Board considered that the fund pays an advisory fee to the Advisor and that, in turn, the Advisor pays subadvisory fees to the Subadvisor.
Subadvisor performance. As noted above, the Board considered the fund's performance as compared to the fund's peer group and the benchmark index.The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk-adjusted performance of the Subadvisor. The Board was mindful of the Advisor's focus on the Subadvisor's performance. The Board also noted the Subadvisor's long-term performance record for similar accounts, as applicable.
The Board's decision to approve the Subadvisory Agreement was based on a number of determinations, including the following:
(1) | the Subadvisor has extensive experience and demonstrated skills as a manager; | |
(2) | the fund's performance has generally outperformed the historical performance of comparable funds and the fund's benchmark index; | |
(3) | the subadvisory fees are reasonable in relation to the level and quality of services being provided under the Subadvisory Agreement; and (4) noted that the subadvisory fees are paid by the Advisor and not the fund and that the subadvisory fee breakpoints are reflected as breakpoints in the advisory fees for the fund to permit shareholders to benefit from economies of scale if the fund grows. | |
* * * |
Based on the Board's evaluation of all factors that the Board deemed to be material, including those factors described above, the Board, including the Independent Trustees, concluded that renewal of the Advisory Agreement and the Subadvisory Agreement would be in the best interest of the fund and its shareholders. Accordingly, the Board, and the Independent Trustees voting separately, approved the Advisory Agreement and Subadvisory Agreement for an additional one-year period.
Trustees Hassell H. McClellan, Chairperson Officers Andrew G. Arnott John J. Danello Francis V. Knox, Jr. Charles A. Rizzo Salvatore Schiavone | Investment advisor John Hancock Advisers, LLC Subadvisor John Hancock Asset Management a division of Manulife Asset Management (US) LLC Principal distributor John Hancock Funds, LLC Custodian State Street Bank and Trust Company Transfer agent John Hancock Signature Services, Inc. Legal counsel K&L Gates LLP |
*Member of the Audit Committee
†Non-Independent Trustee
#Effective 6-19-18
The fund's proxy voting policies and procedures, as well as the fund proxy voting record for the most recent twelve-month period ended June 30, are available free of charge on the Securities and Exchange Commission (SEC) website at sec.gov or on our website.
The fund's complete list of portfolio holdings, for the first and third fiscal quarters, is filed with the SEC on Form N-Q. The fund's Form N-Q is available on our website and the SEC's website, sec.gov, and can be reviewed and copied (for a fee) at the SEC's Public Reference Room in Washington, DC. Call 800-SEC-0330 to receive information on the operation of the SEC's Public Reference Room.
We make this information on your fund, as well as monthly portfolio holdings, and other fund details available on our website at jhinvestments.com or by calling 800-225-5291.
You can also contact us: | |||
800-225-5291 jhinvestments.com | Regular mail: John Hancock Signature Services, Inc. | Express mail: John Hancock Signature Services, Inc. |
John Hancock family of funds
DOMESTIC EQUITY FUNDS Blue Chip Growth Classic Value Disciplined Value Disciplined Value Mid Cap Equity Income Financial Industries Fundamental All Cap Core Fundamental Large Cap Core Fundamental Large Cap Value Natural Resources New Opportunities Regional Bank Small Cap Core Small Cap Growth Small Cap Value Strategic Growth U.S. Global Leaders Growth U.S. Growth Value Equity GLOBAL AND INTERNATIONAL EQUITY FUNDS Disciplined Value International Emerging Markets Emerging Markets Equity Fundamental Global Franchise Global Equity Global Shareholder Yield Greater China Opportunities International Growth International Small Company International Value Equity | INCOME FUNDS Bond California Tax-Free Income Emerging Markets Debt Floating Rate Income Government Income High Yield High Yield Municipal Bond Income Investment Grade Bond Money Market Short Duration Credit Opportunities Spectrum Income Strategic Income Opportunities Tax-Free Bond ALTERNATIVE AND SPECIALTY FUNDS Absolute Return Currency Alternative Asset Allocation Enduring Assets Global Absolute Return Strategies Global Conservative Absolute Return Global Focused Strategies Redwood Seaport Long/Short Technical Opportunities |
A fund's investment objectives, risks, charges, and expenses should be considered carefully before investing. The prospectus contains this and other important information about the fund. To obtain a prospectus, contact your financial professional, call John Hancock Investments at 800-225-5291, or visit our website at jhinvestments.com. Please read the prospectus carefully before investing or sending money.
ASSET ALLOCATION Balanced Income Allocation Multi-Index Lifetime Portfolios Multi-Index Preservation Portfolios Multimanager Lifestyle Portfolios Multimanager Lifetime Portfolios Retirement Income 2040 EXCHANGE-TRADED FUNDS John Hancock Multifactor Consumer Discretionary ETF John Hancock Multifactor Consumer Staples ETF John Hancock Multifactor Developed International ETF John Hancock Multifactor Energy ETF John Hancock Multifactor Financials ETF John Hancock Multifactor Healthcare ETF John Hancock Multifactor Industrials ETF John Hancock Multifactor Large Cap ETF John Hancock Multifactor Materials ETF John Hancock Multifactor Mid Cap ETF John Hancock Multifactor Small Cap ETF John Hancock Multifactor Technology ETF John Hancock Multifactor Utilities ETF | ENVIRONMENTAL, SOCIAL, AND GOVERNANCE FUNDS ESG All Cap Core ESG Core Bond ESG International Equity ESG Large Cap Core CLOSED-END FUNDS Financial Opportunities Hedged Equity & Income Income Securities Trust Investors Trust Preferred Income Preferred Income II Preferred Income III Premium Dividend Tax-Advantaged Dividend Income Tax-Advantaged Global Shareholder Yield |
John Hancock Multifactor ETF shares are bought and sold at market price (not NAV), and are not individually redeemed
from the fund. Brokerage commissions will reduce returns.
John Hancock ETFs are distributed by Foreside Fund Services, LLC, and are subadvised by Dimensional Fund Advisors LP.
Foreside is not affiliated with John Hancock Funds, LLC or Dimensional Fund Advisors LP.
Dimensional Fund Advisors LP receives compensation from John Hancock in connection with licensing rights to the
John Hancock Dimensional indexes. Dimensional Fund Advisors LP does not sponsor, endorse, or sell, and makes no
representation as to the advisability of investing in, John Hancock Multifactor ETFs.
John Hancock Investments
A trusted brand
John Hancock Investments is a premier asset manager representing one of
America's most trusted brands, with a heritage of financial stewardship dating
back to 1862. Helping our shareholders pursue their financial goals is at the
core of everything we do. It's why we support the role of professional financial
advice and operate with the highest standards of conduct and integrity.
A better way to invest
We serve investors globally through a unique multimanager approach:
We search the world to find proven portfolio teams with specialized
expertise for every strategy we offer, then we apply robust investment
oversight to ensure they continue to meet our uncompromising standards
and serve the best interests of our shareholders.
Results for investors
Our unique approach to asset management enables us to provide a diverse set
of investments backed by some of the world's best managers, along with strong
risk-adjusted returns across asset classes.
| John Hancock Funds, LLC n Member FINRA, SIPC 601 Congress Street n Boston, MA 02210-2805 800-225-5291 n jhinvestments.com | |
This report is for the information of the shareholders of John Hancock Collateral Trust. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus. | ||
315SA 6/18 8/18 |
ITEM 2. CODE OF ETHICS.
Not applicable at this time.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable at this time.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable at this time.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable at this time.
ITEM 6. SCHEDULE OF INVESTMENTS.
(a) Not applicable.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no material changes to previously disclosed John Hancock Funds – Nominating and Governance Committee Charter.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's principal executive officer and principal financial officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting.
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.: Not applicable.
ITEM 13. EXHIBITS.
(a) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached.
(b) Separate certifications for the registrant's principal executive officer and principal financial officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and Rule 30a-2(b) under the Investment Company Act of 1940, are attached. The certifications furnished pursuant to this paragraph are not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certifications are not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Registrant specifically incorporates them by reference.
(c)(1) Submission of Matters to a Vote of Security Holders is attached. See attached “John Hancock Funds – Nominating, Governance and Administration Committee Charter.”
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
John Hancock Collateral Trust
By: | /s/ Andrew Arnott |
Andrew Arnott | |
President | |
Date: | August 22, 2018 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: | /s/ Andrew Arnott |
Andrew Arnott | |
President | |
Date: | August 22, 2018 |
By: | /s/ Charles A. Rizzo |
Charles A. Rizzo | |
Chief Financial Officer | |
Date: | August 22, 2018 |